ebates.com Pays Cash to Net Shoppers, Hopes to Lure Advertisers

Internet start-up ebates.com, Menlo Park, CA, is betting it can become the link of choice for Web merchants large and small by paying Netizens to shop through its site. In turn, company co-founders Paul Wasserman and Alessandro Isolani are wagering they can entice advertisers eager to reach a swarm of registered cybershoppers at www.ebates.com.

Following its launch this month, ebates began giving consumers the money it gets as a member of about 60 retailers' affiliate networks. Increasingly popular among Web merchants, affiliate networks are groups of sites that carry links to a virtual store in return for a cut of the revenue they generate. ebates passes that cash to the shoppers as a rebate, and the firm hopes to make money by selling banner ad space that targets shoppers based on their buying habits and personal data.

When they brainstormed the concept in December, president/COO Wasserman and vice president of business development Isolani promptly abandoned their posts as deputy district attorneys in the San Mateo County Internet crime unit, setting off to become cyberspace entrepreneurs. Now they hope their idea will strike virtual pay dirt.

"We came up with so many schemes and ideas and plans, and we could shoot them all down," Isolani said. "But when we hit this one, it was like a bell going off."

The challenge, of course, will be to attract enough traffic -- in the form of quality consumers -- to make advertising at www.ebates.com worthwhile. Wasserman and Isolani insist their pool of visitors make better prospects for advertisers because they have a proven interest in online shopping and they're comfortable with transmitting their credit card numbers into cyberspace.

"People coming to our site are specifically online shoppers, period," Wasserman said. "And because of the discounts that we're able to give them in rebate form, they're online buyers who literally have their credit cards out."

Net surfers registering at the ebates site enter basic demographic data and list their shopping interests. Since the company must track customers' purchases in order to know how much to pay them, ebates also can target ads based on individuals' tastes -- which books they bought at Amazon.com, for example.

So confident are the co-founders that they plan to charge advertisers $25 per thousand ad impressions without any targeting, with an extra $5 charge for each demographic characteristic advertisers want. The company also plans to sell the most valuable real estate on its main page to the retailers that make the highest bids.

But the company is not alone in toying with the idea of giving affiliate program payments back to consumers, according to Ken Cassar, digital commerce analyst with Jupiter Communications, New York. Cassar said he knows of other sites considering the idea in order to boost their own visitor loyalty, though he added that none of the sites are ready to publicly disclose their plans.

Additionally, the analyst pointed to at least one Web destination -- www.greatergood.com -- that donates affiliate payments to charity organizations of shoppers' choosing. The site is linked to Amazon.com, eToys and apparel merchant J.Crew, among others. Like ebates, the site encourages people to begin online shopping sessions at their page.

Cassar said ebates likely will find itself "competing with a lot of other promotional sorts of sites that tend to be fairly price-centric." The analyst cited coupon firms such as CoolSavings.com Inc., Houston, and Val-Pak Direct Marketing Systems Inc., Largo, FL as future rivals.

Other challenges lie ahead as well. The ebates executives admitted the company has yet to decide what it will do if, for example, Toys "R" Us Inc. wants to place a banner ad targeting people who have bought at eToys.com -- a company from which consumers get back 25 percent of their purchase price when they buy through ebates.

"We understand that customers who go to eToys will be more valuable to a competitor than they would be to, say, a bookseller," Isolani said.

Most of the time, online buyers will receive their rebates roughly every three months, after retailers send ebates their quarterly affiliate checks. But Wasserman said the prospect of quarterly rebates hasn't slowed customer registrations, adding that delayed rebates are common in the offline world.

In the early going, the company is on track to gain 1 million registered consumers by May 2000, despite having yet to advertise itself, the executives said. The retailers linked to the site include players like Amazon, Beyond.com, Fogdog.com and Reel.com. Companies offer rebates ranging from 1 percent to 25 percent. Smaller sites have asked ebates to join their affiliate networks as well.

The company plans to begin selling banners in June, after which Isolani and Wasserman expect more than 10,000 registered users.

Venture capital firm Foundation Capital, Menlo Park, CA, injected start-up funds into the company in April. The executives declined to specify the size of the investment.